Insurance density falls for first time in India: Report

The Insurance Regulatory and Development Authority (Irda) said the country had a fall in insurance density in 2011, the first year this happened since the opening of the sector to private participation.

The figure fell to $49 (Rs 2,695 approximately) in 2011, from $55.7 (Rs 3,063) in 2010. According to the Irda Annual Report for 2011-12, there was an increase hitherto in insurance density for every subsequent year from 2001.

The measure of insurance penetration and density reflects the level of development of the sector in a country.

While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium to population (per capita premium).

The fall is mainly, it appears, due to the fact that the life insurance sector saw a slowing in premium growth after the September 2010 regulations on unit-linked insurance policies.

Similarly, insurance penetration, which surged consistently till 2009, slipped for a consecutive year and was at 4.1 per cent in 2011, compared to 5.1 per cent in 2010. This has been attributed to a slower rate of growth in life insurance premium as compared to the rate of growth of the Indian economy.

In comparison to other emerging markets, life premium income fell sharply as premium volume shrank in China and India.

"The introduction of tighter regulations governing bancassurance in China and the distribution of unit-linked insurance products in India resulted in a sharp fall in new life premium growth," said Irda's annual report.

It further showed that on the basis of total premium income, the market share of the largest insurer, Life Insurance Corporation (LIC), increased marginally from 69.8 per cent in 2010-11 to 70.7 per cent in 2011-12. The market share of private insurers dipped marginally from 30.2 per cent in 2010-11 to 29.3 per cent. In renewal premium, LIC continued to have a higher share at 69.9 per cent (70.5 per cent in 2010-11), compared to 30.1 per cent (29.5 per cent in 2010-11) for private companies.

The total capital of life insurance companies as on March 31, 2012, was Rs 24,932 crore. During 2011-12, an additional capital of Rs 1,270 crore was brought in.

The non-life insurance sector underwrote total premium of Rs 52,876 crore in India for 2011-12, against Rs 42,576 crore in 2010-11, a 24.2 per cent growth. The premium underwritten by 15 private sector insurers (other than those insurers carrying on the exclusively health insurance business) in 2011-12 was Rs 22,315 crore as against Rs 17,425 crore in 2010-11. The total paid-up capital of non-life insurers as on March 31, 2011, was Rs 6,706 crore, the report further showed.

In terms of underwriting losses, the report showed losses of non-life insurance companies decreased to Rs 8,817 crore in 2011-12, from Rs 9,944 crore in the previous year.

With the third-party motor pool being dismantled from April, insurers expect these losses to further even out in 2012-13.

At end-September this year, there were 52 insurance companies in India, 24 in the life insurance business and 27 in general insurance. General Insurance Corporation is the sole national reinsurer.